CHEMICAL & ENGINEERING
NEWS VOLUME 38, NUMBER 44
T h e Chemical World This W e e k
OCTOBER 3 1 , 1960
Cost-Price Squeeze Undercuts Earnings Chemical executives' talk in recent months about rising operating costs has not been idle worry. The impact of shrinking profit margins shows up clearly in this month's crop of quarterly reports. While about half the chemical and drug firms reporting so far rang up higher sales this past summer than a year ago, less than a third can report increased earnings. And for most firms with lower sales, profits dropped off even more sharply. A tighter squeeze on profits has been apparent all year. But its effects during the first half had been at least partially hidden by a general rise in production and sales. Last summer, however, both output and sales began to edge downward, as many producers
noted some softness in chemical markets. Sales volume, moreover, was hurt by reduced prices for many plastics and synthetic fibers. The combination of reduced volume and steadily rising expenses ate sharply into margins. Among larger firms, for example, Du Pont earned 11.5 cents (exclusive of its General Motors dividends) on each sales dollar during the third quarter, compared with about 14 cents the year before; Union Carbide netted 9.4 cents, down from 10.1 cents last year; Dow 9.2 cents, down from 11.6 cents; Allied Chemical 5.7 cents compared with 6.8 cents; Monsanto 6.3 cents, compared with 7.6 cents; Eastman Kodak 13.6 cents, compared with 14.1
cents in 1959. A similar trend shows up among ethical drug producers, as profits dropped despite modest sales gains. Drug industry earnings have been hampered by stiffer competition and lower prices on vitamins, antibiotics, and other items. Explanations. Companies cite several reasons for this year's poorer showing. Union Carbide, for example, points to increased spending on research and for expansion (capital outlays this year are expected to top $200 million, up from $136 million in 1959). Eastman Kodak notes lower sales this year for polyethylene and some other plastics. National Distillers, whose chemical operations have been less profitable in 1960, puts part
Last Quarter's Dip in Activity Cut into Chemical Producers' Profits
Sales, Chemicals
Production, Chemicals
Based on seasonally adjusted data from the Federal Reserve Board and the Dept. of Commerce and on C&EN estimates
OCT. 31, 1960 C&EN
21
Third Quarter Profits Falter Despite Moderately Higher Sales for Many Firms
CHEMICALS Air Reduction Allied Chemical American Cyanamid American Enka* American Potash American Viscose Atlas Powder Chemstrand Commercial Solvents Diamond Alkali Dow Chemical" Du Pont Duval Sulphur Eastman Kodak' Freeport Sulphur Hercules Powder Heyden Newport Hooker Chemical0 Industrial Rayon Metal & Thermit Monsanto*7 National Distillers National Starch Pan American Sulphur Pen n salt" Rohm & Haas Spencer Chemical Stauffer Texas Gulf Sulphur Union Carbide Wyandotte Chemicals
Net Sales (Millions)
$50.5 187.5" 136.8 20.8 11.8 48.5 18.3" 49.8 14.5 35.5 202.1
532 5.7 229.7 '88.8" 15.0 37.2 11.1 10.1 204.8 144.9 13.6
4.6 23.1 52.6 17.0 56.7 15.6 385.9 27.1
Change from 1959
+3% +8 -5 -22 -13 -17 0 +2 -25 -3 +5 -2 +33 +4 +22 +6 0 -36 +5 +3 -1 +2 0 +7 -2 -6 -4 0 +7 +1
Third I Quarter Change Net""' Income from (Millions) 1959
$3.7 10.7
8.5
+3% -9 -34
(0.2)"
1.1 0.5 0.8 5.9 1.0 2.9
-11 -84 -18 -3 +11 -9 -17 -14 +2 -6 -23 +27 +25 -8
First Earnings 1960
$0.95 0.53 0.40 (0.15)" 0.47 0.11 1.07
0.6
+5*5
13.0
1.6
-15 -23 +5 -9 +18 -16 -37 -13 +27 -1 +37
CL37 0.98 0.68 1.96 0.32 0.85 0.41 0.85 0.38 0.38 (0.54)" 0.73 0.56 0.45 0.37 0.32 0.33 4.15 0.33 0.53 0.34 1.20 1.06
7.0 7.4 5.9 6.9 3.2 1.8 6.3 6.9 6.9 4.4
-13 -13 +1 +14 -23 -5 -9 +14 -19 -14
0.65 0.50 0.35 1.16 0.77 0.40 0.43 1.16 0.49 0.82
18.5 92.5"
0.4 32.8
3.1 7.7 0.9 2.9 (1.0)*
5.0 0.8 0.7 1.3 4.7 1.0 4.9 3.4 36.2
/Share 1959
Nine Months
Earnings/Share 1960 1959
$0.93 0.59 0.61 1.35 0.53 0.66 1.30 ••• 0.33 1.08 0.84 2.29 0.32 0.91 0.54 0.71 0.30 0.42 0.20 0.47 0.66 0.58 0.36 0.35 0.28 4.93 0.56 0.61 0.27 1.21 0.73
$2.98 2.08 1.74 0.36 1.58 0.90 3.47
$2.94 1.99 1.89 3.99 1.60 2.19 4.15
L30 3.17 2.04 6.28
CL82 2.88 2.14 6.90
2^27 1.27 2.36 1.20 1.24 (1.30)" 1.50 2.01 1.49 1.15 1.07 1.01 15.01
2.21 1.45 2.07 0.90 1.35 0.50 1.45 2.18 1.63 1.13 1.26 0.98 15.38
i'.h
1*88 0.96 4.22 1.95
0.75 0.57 0.36 1.01 1.01 0.42 0.47 1.01 0.61 0.95
2.02 1.52 1.13 . . 1.71 1.28 1.26
2.23 1.50 1.05
0.95 3.90 2.30
PHARMACEUTICALS Merck Parke-Davis Pfizer Richardson-Merrell Schering G D. Searle Smith Kline & French Vick Chemical Upjohn Warner-Lambert
55.7 52.2 64.8 40.2 22.5
9.1 36.2 40.2 42.3 51.2
a Includes other operating irevenues. b For 12 weeks ended Sept. 11. c For three months ended Aug. 31. d Net loss. « C&EN estimate.
of the blame on lower prices for polyethylene. Spencer does likewise. Fiber producers have been hit especially hard by price cuts. Lower prices on nylon, for instance, go far to explain reduced profits for Du Pont and Chemstrand. And rayon producers' profits have staggered under the double blow of reduced demand and price weakness. Bright Spots. A few bright spots stand out in the over-all bleak profits picture. Wyandotte, in disclosing a big gain in third quarter earnings, 22
C&EN
OCT. 31, 1960
-1 +3 +3 +12 -6 +7 +4 +12 -7 0
2." 26 1.26 1.36
... 1.24 2.22
1.31 2.20
/ For 12 weeks ended Sept. 4. ii Includes 1Monsanto, its subsidiaries, and its proport ionate 50% share of associated companies. * Preliminary.
says the comparison with last year looks good because 1959 profits were penalized by start-up costs at its Geismar, La., chlorine plant; it also credits growing use of polyethers in urethane plastics. These gains, president R. B. Semple says, offset a general softness that has affected other product lines. Other firms, including Metal & Thermit and Commercial Solvents, have benefited from company reorganizations in the past few years; Commercial Solvents' sales dropped,
but only because of the sale of its profitless automotive chemicals and antifreeze business to Chatham-Reading Chemical last spring. And most companies are still hopeful about the year as a whole. Sales are sure to set a new record, probably between .$27.5 and $28 billion, for the industry. And profits, though they might not match last year's record $2.14 billion, should wind up at a second-best level of around $2 billion, barring a deeper slump in business.
Choice Narrows for East's Saline Water Plant Plant using nuclear heat also being considered for Florida Keys
KRYPTON-86 LAMP. A krypton-86 lamp is adjusted by a National Bureau of Standards scientist. Light from this source has been adopted as the new international standard of length. To increase the stability of the standard wave length, the lamp is operated at 63° K., the triple point of liquid nitrogen
Krypton-86 Becomes Measurement Standard Standard of length based on the wave length of light from krypton-86 replaces standard meter bar A new international standard of length based on a specific wave length of light has been adopted by the 11th General Conference on Weights and Measures at a meeting in Paris. The meter is defined as 1,650,763.73 wave lengths of the orange-red line of krypton-86. This standard replaces the platinum-iridium meter bar which has been kept at Paris as an international standard of length since 1889 under the Treaty of the Meter. The meter bars will not be discarded, however, because of the ease with which they can be used for certain types of measurement. The new definition of the meter will not appreciably change the measurement of length; nor will it in any way change the relationship between the English and metric systems, says the National Bureau of Standards. The inch now is equal to 41,929.399 wave lengths of the krypton standard.
Many scientists have long doubted the reliability of the platinum-iridium bar, which is subject to various conditions that can affect its stability. The new definition, however, is based on a constant of nature, a specified kind of light, which is believed to be immutable and which can be reproduced with great accuracy in any properly equipped laboratory. The conference also confirmed a new definition of the second of time as 1 /3i,556,952.9747 o f t n e tropical year 1900 instead of
1
/8G,4OO of the mean
solar day. And it discussed the possibility of adopting a standard of time based on atomic vibrations—the atomic clock. In addition, the conference, assisted by a $32,500 grant from the Ford Foundation, set up a central facility at the International Bureau of Weights and Measures for international coordination of radiation measurements.
The Office of Saline Water of the Department of the Interior continues to whittle down the number of possible sites for its East Coast saline water conversion demonstration plant. Its latest pruning narrows the choice from 13 to 7 eastern cities. The conversion p l a n t - a proposed 150,000 to 350,000 gallon-a-day unit to use a still unspecified freezing process—is one of five OSW demonstration plants authorized by Public Law 85-883. Sites for the other plants already have been picked (C&EN, Feb. 15, page 3 3 ) . At the same time, from a special meeting in Tallahassee, Fla., between OSW, the Atomic Energy Commission, and state officials come plans for a # possible sixth demonstration unit, this one using nuclear process heat. More than 50 cities, representing every East Coast state, were bidding for the eastern plant. The seven finalists are: Portsmouth, N.H.; Greenport, N.Y.; Cape May, N.J.; Virginia Beach, Va.; Wrightsville Beach, N.C.; and Port Orange and Key West, Fla. The three-man site selection board will personall\ r inspect each of these sites during December. The Board will rate each on the basis of "technical factors" ( 6 2 % ) , "demonstration value" ( 2 4 % ) , and assistance offered (14%). Technical factors include: terrain and bearing, climate and geography, closeness to saline water, brine disposal, zoning and surroundings, adequacy and management of local water utility, power, fuel, materials, labor costs, and available transportation and utilities. Demonstration factors include land population and need, brine utilization, and expansion potential. Local interest runs high in the Florida Keys for a saline water conversion plant using a nuclear reactor heat source, according to one AEC official. AEC has a cooperative agreement with the Department of Interior for a joint nuclear reactor-saline water conversion installation. An earlier one proposed for San Diego, Calif., was vetoed by the Atomic Reactor Safeguard Committee. But a preliminary examination of the Keys turned up some sites that appear satisfactory from a safety standpoint, according to AEC. OCT. 31, 1960 C&EN
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